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Osborne warns of decades of economic pain if UK quits EU

Mon, Apr 18, 2016 - 4:45 PM

Leaving the European Union would be an economic blow that would shrink Britain's economy 6 per cent by 2030, according to a Treasury analysis produced as the government attempts to dissuade the electorate from voting to quit the bloc.

PHOTO: REUTERS

[WASHINGTON] Leaving the European Union would be an economic blow that would shrink Britain's economy 6 per cent by 2030, according to a Treasury analysis produced as the government attempts to dissuade the electorate from voting to quit the bloc.

The details will be published by Chancellor of the Exchequer George Osborne on Monday morning. The first week of formal campaigning ahead of the June 23 referendum sees the government turn its biggest guns on the arguments advanced by those backing a so-called Brexit.

"These people who go around saying you can have all the benefits without any obligations, that's economically illiterate and it frankly totally misunderstands the nature of the relationship Britain might have outside the EU," Mr Osborne told BBC Radio 4's "Today" program on Monday. "The Germans or French wouldn't give that to us because it's a better deal than Germany or France get."

Mr Osborne's intervention comes a day after French Economy Minister Emmanuel Macrontold Britain that outside the EU it would be "completely killed" in trade talks with countries such as China, and days before US President Barack Obama is due to visit the UK and offer his own warning against leaving.

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The Treasury will release its analysis following a speech by Mr Osborne in western England at 10.15 am London time. The report will argue that an exit would cause permanent rather than temporary damage to the economy due to lower trade and investment, which would cut government income at "enormous costs" to public spending, such as on the state-run National Health Service and defense, Osborne wrote in an article in the Times newspaper.

A Canadian-style post-Brexit agreement with the EU, as advocated by some campaigners to leave, would shrink gross domestic product by more than 6 per cent, making each household 4,300 pounds (S$8,285) a year poorer by 2030, he wrote.

"Leave the EU, and the facts are: Britain would be permanently poorer," Mr Osborne wrote. "Britain's families would be permanently poorer too." John Redwood, a senior Conservative member of Parliament who has long argued Britain should leave the EU, rejected the analysis.

"It's an absurd claim from the Treasury," he told the BBC. "I'm very sorry that they've degenerated to these levels. Germany has made it very clear they don't want new barriers in the way of their very successful export business to Britain."

Mr Redwood offered his own vision of a post-Brexit Britain: "We're going to be better off, we're going to banish austerity, we're going to spend our own money, we're going to have the power to make our own laws, we're going to control our own borders."

Monday's report is the latest in a series of economic warnings issued by Prime Minister David Cameron's government as it seeks to convince voters to remain in the 28-nation bloc. It will counter claims by campaigners for Brexit, including Justice Secretary Michael Gove and Mayor of London Boris Johnson, that leaving the EU would free up billions of pounds for the NHS and other public programs.

The chancellor's speech comes a day after his return from the International Monetary Fund's spring meeting in Washington, at which concerns about the UK's potential exit dominated discussions. Both the IMF and the World Bank said an exit would damage global growth. Mr Osborne told reporters on Friday that concerns had been raised by China and Japan, as well as European states.

France's Mr Macron gave a blunt assessment on Sunday of the idea advanced by the "Leave" campaign that a vote to leave the EU would allow Britain to forge closer alliances with other trading partners, such as China.

"Today, you are strong because you are part of the EU," he told BBC Television. "When you discuss your steel industry with China you are credible because you are part of the EU, not because you are just the UK You will be completely killed otherwise."

Government warnings about the immediate domestic implications of an exit have also been plentiful. Mr Osborne said Friday that an exit was likely to cause mortgage rates to rise. Speculation of political instability has also been raised, with former Tory Chancellor of the Exchequer Ken Clarke saying a vote to leave would make Mr Cameron's position as prime minister untenable.

Mr Osborne's appearance before lawmakers on the Treasury Select Committee has been postponed by nine days to April 28 to allow the panel to fully consider the Treasury's report.